Report of the Standing
Committee on Appropriations on the 2010/11 First Quarter Expenditure Report,
dated 08 February 2011
Having received a briefing from the National Treasury on the first
quarter expenditure report for the financial year 2009/10 and having considered
the contents thereof, the Standing Committee on Appropriations reports as
follows:
1.
Introduction
As required by the Money Bills Amendment Procedure and
Related Matters Act, No.09 of 2009, the National Treasury tabled the first
quarter expenditure report to the Committee on 24 August 2010 for its
consideration. This report provided expenditure trends for the end of the first
quarter of the 2010/11 financial year. A number of issues that require the
attention of the Executive emanated from this report. Some challenges that were
noted and reported upon in the previous reports still recur in the 2010/11 first
quarter expenditure of government. It should, however, be noted that the
Committee has adopted a number of follow-up initiatives in its recent reports
to ensure that the issues raised by the Committee are addressed.
This report focuses on the spending trends by
different departments and highlights in detail some challenges that still exist
in the implementation of budget. Ten Departments were identified for the analysis
of their expenditure trends with the focus being on the departments that
reported high and slow spending. These include the departments of Home Affairs,
International Relations and Cooperation, Public Enterprise, Sports and
Recreation, Communications, Energy, Environmental Affairs, Rural Development
and Land Reform, Trade and Industry and Water Affairs.
2.
Expenditure Trends at the End of First Quarter of 2010/11 Financial Year
National departments were allocated R461.5 billion in the 2010/11
financial year, excluding direct charges against the National Revenue Fund. This included R128.7
billion (27.88 per cent) for current payments, R302.6 billion (65.68 per cent)
for transfers and subsidies, R9.3 billion (2.01 per cent) for capital
expenditure and R20.9 billion (4.53 per cent) for payments for financial assets.
The departments transferred R21.6 million and R3 million from current payments
as well as transfers and subsidies, respectively to capital payments. The
transfer of funds early in the financial year is noted as an indication of
unrealistic budgets and lack of proper planning by departments.
National departments have spent R105.5 billion (22.86 per cent) at the
end of the first quarter. An expenditure of R26.9 billion (20.87 per cent) was
reported on current payment, R72.4 million (23.94 per cent) on transfers and
subsidies, R1.1 billion (11.37 per cent) on capital expenditure and R5.2
billion (24.67 per cent) on payments for financial assets. The year-on-year
spending comparison reflected a declining trend of 2.07 per cent. The national departments
spent 24.93 per cent of their budgets in the first quarter of 2009/10 financial
year. This decline in spending is reflected in all economic classifications except
the newly introduced payments for financial assets. Approximately 23
departments have spent below the general quarterly benchmark of 25 per cent
while 5 departments have spent above 30 per
cent of their budgets. Different factors have contributed to this
spending trend and they differ from Department to Department.
Furthermore, information was not provided regarding the spending of the
Department of Women, Children and People with Disabilities. A budget was
allocated to this Department but expenditure could not be determined due to a lack
of reporting systems within the Department. The National Treasury indicated
systems were being developed and it was expected that the Department would be
able to report through these systems in the second quarter of the financial
year. The Committee notes with concern that the lack of reporting systems
introduces new financial management risks. Accountability is central in
exposing misuse of funds and the lack of these systems minimises the levels of
accountability by the Department. In view of this fact, the Committee will pay
more attention to this Department during the next expenditure reporting in order
to satisfy itself that all transactions were in accordance with set prescripts
during the development and implementation of systems.
3.
Spending trends for the Selected Departments
The departments have reported different levels of spending on their
budgets. While the Department of Cooperative Governance and Traditional Affairs
reported a lowest spending in the first quarter, it was not selected for
scrutiny of its expenditure for the purpose of this report. A substantial number
of the departmental budget was allocated for transfers to other spheres of
government. Due to the misalignment of the financial years, for municipalities were
not transferred.
The Department of Communications is among the lowest spending departments.
It spent 9.86 per cent of its budget while the Department of Sports and
Recreation is the highest spending department at 57.49 per cent. Among the departments
with abnormal spending trends, the following were selected for further scrutiny to identify
challenges faced in the implementation of budgets.
Table 1: Spending Trends per Department
Source: National
Treasury (2010)
3.1
Department of Home Affairs
The Department of Home Affairs was allocated R5.7 billion in the 2010/11
financial year. This budget supported a number of policy initiatives identified
by government. These included:
·
Strengthening birth
registration and ID campaigns.
·
Access to excellent levels
of service.
·
Improving security of
business processes and systems, including permitting system for temporary and
permanent residence permits and section 22 asylum permits.
·
Sustaining the turnaround
strategy through improved leadership, management and governance, skilled staff,
integrated business processes and systems, and facilitative infrastructure.
·
Implementing of strategies to prevent, detect
and take action against corruption.
An amount of R942.4 million (16.48 per cent) was spent at the end of the
first quarter. The Department has reported an expenditure of less than 25 per
cent in all of its programmes. The lowest spending of 9.66 per cent was
reported on the Administration programme while the Department spent 16.27 per
cent of the Immigration Services budget. The Administration programme was
allocated R1.5 billion but only spent R142 million as payments for rates and
taxes to municipalities are made at the end of each quarter. On numerous
occasions municipalities have expresses their concern at the lack and/or
non-payment of rate and taxes owed by government departments which was a contributing
factor to their poor levels of revenue collection. Municipalities have always
maintained that any negative impact on their revenue collection affects the
delivery of services. It is not clear whether the arrangement of quarterly
payments was formally agreed upon with municipalities.
Furthermore, of the R1.4 billion allocated to the Immigration Services
programme only R198.4 million (16.27 per cent) was spent by the end of the
first quarter. This was attributed to delays in the payment of Advance
Passenger Processing (APP) rollout for improving operations at key ports of
entry. The APP was aimed at ensuring clearance of about 8 million travellers
during 2010 FIFA World Cup. Other factors that contributed to the slow spending
by the Department included:
·
Payments to Government
Printing Works of approximately R100 million for new passports were not
finalised.
·
Late payments for the
introduction of Late Registration of Birth (LRB) on the spot adjudication
campaign.
·
Quarterly spending for the
Master Rental Agreement with GijimaAst which was withheld in the first quarter.
·
Funds which were not
transferred to the Independent Electoral Commission (IEC) following a request
by the IEC that such funds be deferred to the fourth quarter.
While the Department reported that the payment to GijimaAst was
withheld, no reason was provided for the withholding of these funds. The
Committee will further interrogate this matter and obtain the required
explanation. It is its view that this will provide a full picture of any
challenges experienced regarding GijimaAst. It is envisaged that this might
also afford the Committee an opportunity to suggest early intervention to avoid
any risks that might be associated with this payment.
3.2
Department of International Relations and Cooperation
The Department of International Relations and Cooperation was allocated
R4.8 billion in the 2010/11 financial year. A substantial portion of this budget
amounting to R2.9 billion was allocated to the International Relations and Cooperation
programme, which is responsible for implementing foreign policy and supporting
diplomatic missions abroad. The Administrative programme was allocated R1
billion. The Department’s budget priorities include:
- Consolidation
of the African agenda: This includes the strengthening of the African
Union, promoting integration and development through Southern African
Development Community (SADC) as well as supporting peace, security and
post conflict reconstruction.
- Strengthening
South-South relations: this intends to promote solidarity and
interdependence among developing countries.
- Strengthening
North-South relations: the Department planned to focus on trade agreements
with
- Participate in
the global system of governance: continue participating in international
dialogues on disarmament, non-proliferation and arms control, and climate
change, and in the G8 summits.
- Strengthening
political and economic relations: strengthening
The Department had spent R716.9 million (14.86 per cent) at the end of
the first quarter. This was less than 25 per cent in all of its programmes. It
reported the lowest spending of less that one per cent in International
Transfers programme. This programme was allocated R784.7 million but only R3.7
million (0.47 per cent) was spent at the end of the first quarter. The low
spending was attributed to delays in transfer payments to international
agencies and organisations which are made at the end of the financial year. The
other contributing factors for the department’s spending trend included:
- Slow spending
on capital assets as some capital projects were not implemented on the Foreign
and Domestic Property Management sub-programme.
- Delays in
capturing the expenditure incurred by the missions.
3.3
Department of
Public
The Department was allocated R350.6 million in the 2010/11 financial
year. This budget supported policy priorities and strategic focus of the
Department, which include the following:
- Aligning State Owned
Enterprises’ (SOEs) planning and performance with the national policy
priorities.
- Assessing and
strengthening corporate governance of SOEs to promote compliance with the
new Companies Act.
- Assisting in
improving efficiencies in the management of SOEs.
- Systematic
integration of key SOE programmes into the broader industrial policy and
economic cluster programme.
The Energy and Broadband Enterprises programme, which is responsible for
aligning the corporate strategies of Eskom, Pebble Bed Modular Reactor and Broadband
Infraco with government’s strategic intent and targets received a substantial
share of R150.4 million of the budget.
The Department had spent R165 million (47.07 per cent) of its budget at
the end of the first quarter. An amount of R140.8 million (93.66 per cent) was
spent on Energy and Broadband Enterprises programme. This was influenced by a R138.6
million (100 per cent) transfer to Broadband Infraco for the national long
distance fibre optic network. The high level of spending by the Department was
mainly due to this transfer. The Department had under-spent in the majority of
its programmes. It spent less than 18 per cent in five programmes. The
Administration programme was allocated R101.3 million but spent R17.9 million
(17.64 per cent). The Legal, Governance
and Transactions programme received R54.4 million but spent R1.2 million (2.19
per cent) while the Manufacturing Enterprises programme received R16.2 million but
spent R1.1 million (6.63 per cent) of its budget. An amount of R36 million was
allocated to Alexor for the funding the shortfall in respect of the
- Operational
expenditure was committed but invoices were still outstanding.
- Less than
anticipated travel expenditure.
- Office
accommodation claim not yet made by the Department of Public Works.
- Posts budgeted
for on one programme were moved to other programmes within the Department.
Posts were moved from both Transport Enterprises, and Legal, Governance
and Transactions programmes.
- Legal claims
projected to be paid in April were not received from the Department of
Justice.
- Vacant posts in the Manufacturing Enterprises and Joint Projects
Facilities programme.
3.4
Department of Sports and Recreation
The Department of Sports and Recreation was allocated R1.2 billion in
the 2010/11 financial year. A substantial amount of these funds amounting to R1
billion was for transfers and subsidies. The remaining budget of approximately
R200 million was allocated for the administration of the Department. The
transfer budget included transfers to sport federations, Departmental agencies
and conditional grants. The budget supported three focus areas of the
Department, including:
- Mass
Participation: Among other things, the Department planned to strengthen
relations with Department of Basic Education in delivering school sports
programmes.
- Sports
Development: This includes the identification and monitoring of talent,
and scientific support to talented athletes from disadvantaged areas. It is
also aimed at developing clubs and rolling out the national sports
facilities plan.
- High
performance: The Department aimed to improve
The Department had spent R716 million (57.49 per cent) of its budget at
the end of the first quarter. The highest spending of the budget was reported
on the transfers and subsidies category. An amount of R680.8 million (64.99 per
cent) was transferred to receiving agencies. The high spending on transfers and
subsidies was attributed to the 100 per cent transfer of conditional grants to
municipalities under the FIFA World Cup Unit programme. These included the 2010
FIFA World Cup Development and 2010 World Cup Host City Operating grants.
Furthermore, this high spending was influenced by the 100 per cent VAT refund of
R40 million to FIFA for the FIFA World Cup tickets. As a result of these
transfers, R554.7 million (99.29 per cent) of the 2010 FIFA World Cup Unit
budget had been spent at the end of the first quarter. However, transfers were
not made to other agencies, including sports federations, Boxing SA and Lovelife.
It was indicated that these were to be transferred from the second quarter
onwards.
While the Department reported a high overall spending, it should be
noted that its expenditure was still too slow in some of its programmes. The
Department spent less that 14 per cent in half of its programmes, as shown
below:
- The Sport
Support Services programmes was allocated R102.1 million but only R8.1
million (7.92 per cent) had been spent at the end of first quarter..
- The
International Liaison and Events programme was allocated R23.3 million but
R2.4 million (10.29 per cent) had been spent. As per the explanation
provided by National Treasury, expenditure for this programme was higher
than its projections due to the early payment of registration fees for
- The Facilities
Coordination programme was allocated R6.6 million but R911 000 (13.71 per
cent) had been spent.
The following are the reasons provided by the Department for
under-spending in certain programmes:
- Delays in
identifying an appropriate service provider to procure learning material
for the training and development programmes.
- Delays in
placing orders for the scientific support programmes.
- Spending for
capital asset under the Facilities Coordination programme had not started
as business plans were not received from municipalities for the use of
mobile gyms. The mobile gyms are only purchased after business plans have
been submitted and approved.
3.5
Department of Communications
The Department of Communications was allocated R2.1 billion in the
2010/11 financial year. An amount of R1.6 billion (76.95 per cent) of the
Department’s budget was allocated to transfers and subsidies. The ICT Enterprise
Development programme consumed 98.65 per cent of the transfer budgets. These
included transfers to Departmental agencies and public corporations. The
Departmental budget supported the following strategic goals:
- Ensuring
accessible, robust, reliable, affordable and secure ICT infrastructure: This
was aimed to ensure transition from analogue to digital broadcasting by November
2011. The Department planned to finalise the strategy for the set top box
manufacturing sector development during 2010/11. It further aimed to develop
a scheme for ownership support of set top boxes to allow approximately 4.5
million poor television owning households to afford a set box.
- Strengthening
oversight of public entities: Implementation of specific interventions
aimed at improving the performance of public entities in the ICT sector.
- Facilitating the
building of an inclusive information society.
The Department had spent R208.5 million (9.86 per cent) of its budget at
the end of the first quarter. There was a slow spending in the transfers and
subsidies category that constitutes a substantial share of the budget. The
Department has only spent R147.5 million (9.07 per cent) of the R1.6 billion
budget allocated to transfers and subsidies. Funds for almost all the
departmental agencies and public corporations had not been transferred at the
end of the first quarter. Only R147.4 million was transferred from the ICT
Enterprise Development programme against the projected outflow of R454.7
million. The slow spending was attributed to:
- An amount of
R71 million that was earmarked for the Digital Terrestrial Television
(DTT) project which was not transferred to Sentech as no request was
submitted for these funds. The request was not submitted because of the
delays in finalising the spectrum frequency plan by ICASA. This impacted negatively
on the digitisation of the broadcasting infrastructure.
- The
non-transferral of the last tranche for the close-out of the 2010 FIFA
World Cup projects to Telkom. The reasons for the non-transfer were not
provided by the Department.
While the Department gave explanations in two areas where the funds
could not be transferred, these explanations did not cover all the areas where
funds were not disbursed. Transfers were not made to agencies, including the SABC,
South African Post Office, National Electronic Media Institute of
·
Vacant positions in the
Administration, International Affairs and Trade, ICT Policy Development and
Infrastructure Development programmes.
·
Delays in finalising
projects in the Administration programme. The Broadband Digital Migration
Awareness projects was started in 2009/10 but was deferred upon instructions by
the Department’s leadership.
·
Delays by international
organisations to submit annual membership invoices.
·
Withholding of
international follow-up trips at the Director-General’s instruction in ICT
International Affairs and Trade programmes.
·
Delays in implementing projects
due to the delayed tender processes in the ICT Policy Development programme.
·
Delays in project
implementation in the ICT Infrastructure programme. These included the Spectrum
Audit, World Radio Communication Conference, Critical Information
Infrastructure Regulation, Accreditation of Authentication service providers as
well as the establishment of cyber inspectorate.
·
Delays in implementing
projects that were undergoing Bid Committee adjudication processes under the
Presidential National Commission programme. These projects included the
E-barometer, Foresight and Planning Centres of Excellence, development of
hospital websites in seven provinces, digitisation content of military veterans
and the national digital repository.
It should be noted that the Department was among the departments that
reported high under-expenditure levels in the 2009/10 financial year. An amount
of R15.5 million for ICT Infrastructure Development programme was not spent due
to delays in converting PPP processes to national PPP. The Department recorded
an under-spending of 6.82 per cent in 2009/10 due to a number of factors that have
recurred in the first quarter of the 2010/11 financial year. These included:
·
Number of vacancies.
·
Non-disbursement of funds
to receiving entities.
·
Development of website for
hospitals.
3.6
Department of Energy
The Department of Energy received
an allocation of R5.53 billion in the 2010/11 financial and it had only spent
R684.5 million or 12.3 per cent of the allocation. The under expenditure was
due to the lower than expected expenditure on Current Payments. This category
was allocated an amount of R202.1 million but the Department had only spent
R42.9 million or 94 per cent of its projected expenditure in this economic
classification at the end of the first quarter. Initially the Department had
projected to spend R45.7 million in the first quarter on Current Payments. The Department had thus under spent on current
payments by 0.6 per cent. The lower than projected expenditure was on goods and
services. This was due to the outstanding payments which were not paid to the
Department of Mineral Resources. The two Departments had been sharing a lease
agreement for accommodation. They were therefore supposed to share the costs
however the Department of Mineral Resources ended up paying for the lease
agreement with the understanding that the Department of Energy would compensate
it later.
This high level of under expenditure
has also emanated from programme 2 (Hydrocarbons and Energy Planning). This
programme had only spent R12.8 million or 0.82 per cent of its budget in the
first quarter as a result of delays in the transfer of R1.5 billion which still
had to be made to the Transnet Pipeline Construction of a petroleum pipeline.
These delays were attributed to ongoing negotiations by the Department towards the
signing of contracts as part of its service level agreement with the Transnet Pipeline.
These also included conditional grants such as National Electrification
Programme Grant, Electricity National Electrification Programme Grant,
electricity Demand side, Working for Energy, and the conditional Grant to
Eskom.
While there has been an overall
under expenditure , there are certain programmes which have spend beyond their projections.
The expenditure on goods and services has gone faster than projected. The
Department had allocated R8.7 million for goods and services but it had spent
R4.0 million or 46 per cent of the total allocation for goods and services at
the end of the first quarter. This was due to the financial pressures
encountered as a result of an insufficient operational budget to cover for the
day to day expenses related to inspection and verification that had to be
conducted under the Integrated National Electrification programme (INEP).
The Department was allocated R3.4
billion in programme 4 (Associated Services) and it had projected to spend
R530.9 million but spent up to R640 million which was more than its projection
for the first quarter. In view of this over expenditure, the National Treasury
indicated that the Department had submitted a request to revise its monthly
drawings from the National Revenue Fund (NRF) in June 2010 but the Department
failed to submit required supporting documents to outline the number of
electrification connections that would be delivered per month in order to
justify the increase in the funding requirements of their implementing agents
(Eskom and Municipalities).
3.7
Department of Environmental Affairs
The Department of Environmental
Affairs was allocated a total budget of R2.6 billion in the 2010/11 financial
year, the Department had spent R443 million or 17 per cent of the original
budget at the end of the first quarter. The Department had project to spend up
to R469 million in the first quarter but only R443 million was spent. This
under expenditure was due to the low spending on capital payments which resulted
from the non-payment for computer equipment that was supposed to be made in the
first quarter. The under spending was
also attributed to the slow spending on programme 1. The Department had
projected to spend R62 million in the first quarter for programme 1
(Administration) but only R40 million was spent. This meant that the Department
had under spent by R20 million in this programme. It was indicated that
accommodation invoices that had note been received from the Department of
Public Works were a key contributor to this under expenditure. .
The Department had projected to
spend up to R25 million in programme 4 (Climate Change) in the first quarter
but had spent R19 million or 75 per cent of this projected spending. The slow
spending was due to the late payments to Smit Amandla for operational costs of
SA Aghulas Polar Research Vessel.
A number of transfers to certain
entities had not yet been made in the period under review; this meant that
there was a zero expenditure on the following:
- South African Nation parks ( Parks Development
and establishment and roads),
- Council for Scientific and Industrial Research
(Research Contracts),
- Global Environmental Fund (Membership fee),
- Expanded Public Works Programme: Environmental
projects targeting the unemployed, youth women, the disabled and small,
micro and medium enterprises,
Even though most of the programmes
in the department had under spent, some had over spent. Programme 3, Ocean and
Coastal Management was allocated an amount of R44 million to spend in the first
quarter but the Department had spent up to R53 million or 120 per cent of the
allocation at the end of the first quarter. This meant that the Department had
over spent its budget for the first quarter by 20 per cent. According to the National Treasury, this
level of over expenditure was due to the fact that the DEA had to pay
compensation of employees, performance bonuses, over time and sea going
allowances for the Department of Agriculture, Fisheries and Forestry (DAFF)
staff members in relation to the Fisheries function for 2010. The amount was,
however, refunded by the DAFF in July 2010.
3.8
Department of Rural Development and
Land Reform
The Department of Rural Development
was allocated a total budget of R6.7 billion for the 2010/11 financial year. It
had projected to spend at least 25 per cent of the entire budget in the first
quarter but could only spend R851 million or 13 per cent of the entire budget.
This meant that the Department had under spent by 12 per cent of the entire
budget in the first quarter. The slow
expenditure was mainly on household transfer expenditure which was meant to be
utilised for settling of new claims but instead was utilised to settle
outstanding restitution court cases.
The Department had also spent R552
million or 35 per cent in programme 4 (Restitution) in the first quarter. This
was attributed to the large number of restitution court cases that needed to be
settled by the Department in the first quarter.
Payments under the Transfers and Subsidies programme amounting to R1.1
billion had not been made to departmental agencies such as Agricultural Land
Holdings Account for Land Acquisition.
The Department had allocated an
amount of R4.1 billion for programme 5 (Land Reform) but had spent R162 million
or 4 per cent of this budget at the end of the first quarter. This slow
expenditure on this programme was due to the fact that bulk of expenditure
under this programme was used for operational expenditure. The rest had been
shifted to the Restitution programme since the Department was focusing on
resolving restitution court cases. The need to focus on the restitution
programme was triggered by the fact that the Department had been issued with a
notice of property attachment as a result of failure to settle restitution
claims. In order for the Department to
be able to deal with these settlements, funds needed to be shifted from the Land
Reform programme to the Land Restitution.
This shifting of funds, however, impacted negatively on other programmes
resulting in the reduced spending on them.
Furthermore, the high level of shifting of funds also defeated the
original purpose of certain programme as the initially intended targets and
objectives are not met by the end of the financial year.
3.9
Department of Trade and Industry
The Department was allocated an amount
of R6.1 billion in the 2010/11 financial year. The Department had projected to
spend about 25 per cent of the budget in the first quarter but only R1.01
billion or 16.6 per cent of the budget had been spent at the end of the first
quarter. This meant that the department had under spent by 8.4 per cent when
compared to its projections. This slow spending in the Department was attributed
to the under expenditure on the following economic classifications:
At the end of the first quarter the
Department had only spent R196 million or 17.3 per cent of R1.1 billion which was
allocated for current payments. The
under expenditure in this category was attributed to the high volume of vacant
positions in the department for the period under review. A further contributor to the under
expenditure was the slow spending on goods and services due to a number of
outstanding invoices, lower demand for contractors, consultancy services and
lower spending on advertising.
The Department had spent R820
million or 16.4 per cent on transfers
and subsidies in the first quarter of 2010/11. The slow spending on
transfers was mainly due to the non compliance of some receiving entities which
did not submit required documents before the transfer could be made. The
National Treasury indicated that the Department was going to engage with these
entities to enforce compliance with service level agreements. Transfers could
thereafter be made.
The Department had only spent R1.3
million or 7.2 per cent of its allocated budget by the end of the first
quarter. The slow spending emanated from the non payment of computer equipment since
the delivery of such had not taken place on time.
The Department indicated that most
of the reported under expenditure has occurred in various incentive schemes and
some of these schemes were still under the investigation or review. The
Department also indicated that the under expenditure in the first quarter was
inevitable since most of the claims were made in the second quarter of the
financial year. The fact that certain incentive schemes were still new in the
Department also meant that there was less demand for such schemes hence the under
spending. The Department, through its in-year
monitoring report was anticipating an under expenditure at the end of the
financial year. According to the report of the National Treasury the Department
had indicated that it would under–spend by R395 million or 6.4 per cent of the
total budget at the end of the financial year.
The anticipated under expenditure of R55.r million would emanate from
the current payments programme due to vacancies and unspent funds for goods and
services. An under expenditure of R334.1 million on transfers and subsidies and
R5.7 million on capital payments were also anticipated. This meant that the Department would spend
about R5.8 billion or 93.6 per cent at the end of the 2010/11 financial
year.
3.10
Department of Water Affairs
The Department of Water Affairs was
allocated a total amount of R7.9 billion in the 2010/11 financial year. In the first quarter the Department had
projected to spend R1.9 billion of its budget but only spent R1.2 billion or
15.9 per cent of the allocation. This meant that the Department had under spent
by R724 million or 9 per cent of the projected amount in the first quarter.
This under expenditure was due to the slow spending which was experienced by
the Department in all economic classifications despite having projected to
spend at least 25 per cent of its budget in the first quarter.
The Department had allocated an
amount of R3.6 billion for current payments but only spent R523 million or 14.4
per cent of its budget by the end of the first quarter. This reflected an under
expenditure of 10.6 per cent in the total budget. The lower than expected
expenditure on current payments was attributed to savings of R50 million on
vacant posts. Some levels of under expenditure were due to the delays in
advertising vacant posts, especially those that were classified as occupation
specific dispensation (OSD) positions. The slow spending was also due to
unspent funds for goods and services as a result of outstanding invoices for
the use of Government motor transport by the Department. The newly introduced
Supply Chain Management process has also contributed to delays by not issuing
orders on time.
The Department had allocated about
R3.2 billion for transfers and subsidies in the 2010/11 financial year. In the
first quarter the Department had only managed to spend R742 million or 22.9 per
cent of its budget. This resulted in an under expenditure of R14.2 million or 2
per cent in the first quarter. The lower than expected expenditure in this
category was attributed to the non transfer of funds to Departmental Agencies
and to De Hoop Dam due to outstanding invoices.
The Department had allocated an
amount of R1.1 billion towards capital payments for the 2010/11 financial year.
As of the first quarter the Department had only managed to spend R9.5 million
or 24.1 per cent of capital budget. The under expenditure was due to delays in the
signing of contracts between Department of Water Affairs and the service
providers of certain capital projects in relation to Regional Bulk
Infrastructure Grant and Accelerated Community Infrastructure Project (ACIP)
for the provision of water services. The
project was a rapid intervention focusing on three areas namely, Community Infrastructure,
Water Conservation, Demand Management and Waste Water Infrastructure Refurbishment
programme. The programme was targeting five provinces namely, Mpumalanga,
Limpopo, Eastern Cape, KwaZulu-Natal and Northern Cape Province. Essentially,
it targeted only those areas which had water related challenges such as
cholera, water shortage, water loss, water wastage as well as the demand and
supply of water in general. The bulk of this capital budget had been allocated
to programmes such as Masibambane programme which provided water services in
rural areas, the poverty alleviation programmes such as Working for Water,
Working on Fire programme and the Municipal Drought Relief Grant.
4.
Committee Findings:
- There is a persistently high level of vacancies across
departments generally. These vacancies impact negatively on the delivery
of services and compromise government priorities including fight against
poverty and unemployment.
- There are persistent delays in payments for goods
and services allegedly due to the non submission of invoices by service
providers timeously. This culture
has been noted in the following departments: Department of Energy,
Environmental Affairs, Trade and Industry and Water Affairs. This is in
contravention of the Public Finance Management Act (PFMA). This brings to
question the capacity of the Department to manage its programmes on land
restitution.
- The Committee found that the Department of Rural
Development had only spent 13 per cent of its budget in the first quarter
while the rest of the budget was shifted to make settlement of court cases
for restitutions programme. This compromises the funds of certain
programmes since funds are shifted to deal with settlements as ordered by
court.
- The Committee notes with concern the persistent
under-spending by certain departments including the Department of Water and
Environmental Affairs whose under-spending can largely be attributed to failure
to transfer funds to agencies and projects including the De Hoop Dam
Project.
- Recommendations
Having considered the above report, the Committee recommends as follows:
- The departments
of Trade and Industry and Water and Environmental Affairs should fill all
funded vacancies within the next three months.
- The departments
of Energy, Water and Environmental Affairs as well as Trade and Industry
should consolidate and strengthen their procurement processes and ensure
that service providers are paid without delays.
- The Department
of Water and Environmental Affairs should, within three months, present to
Parliament a clear plan or measures taken to address the issue of under
expenditure on transfers and subsidies. The Committee will monitor the
implementation of these recommendations.
Report to be considered.